Socioeconomics, Biosafety, and Biotechnology Decisionmaking: Implications for Developing Countries

Jos Falck Zepeda

Research Fellow /Leader Policy Team Program for Biosafety Systems (PBS) IFPRI

A Special Seminar of the SEARCA Agriculture & Development Seminar Series (ADSS) co-organized by the Department of Agricultural Economics, College of Economics and Management, University of the Philippines Los Baos and National Institute of Microbiology and Biotechnology (BIOTECH), 2 August 2011. This presentation is partially funded by IDRC Canada and USAID, through the Gender and Biotechnology and the Program for Biosafety Systems (PBS) projects. Author is the only entity responsible for content in this presentation, which does not constitute the opinion of either donor.

Core message from this presentation

The assessment of socio-economic considerations as related to the adoption of genetically engineered crops, provides extremely useful knowledge for decision makers.
However, within the scope of a biosafety regulatory process that leads to a decision whether to release a GE technology -and if a decision has been reached as to the usefulness/desirability of SEC assessments to a countrythen proper implementation and inclusion of such procedures is critical for achieving the goal of a functional biosafety system.

Content
I. Discuss socio-economic consideration (SEC) assessments as related to biosafety regulations II. SEC assessments: What do we know? III. SEC inclusion in decision making: Country experiences IV. Practical considerations for regulatory design

What are socio-economic considerations (SEC) assessments?

Diverse research focus Household, Farm, Communities, Industry, Consumer, Trade Gender, health, age, institutional issues May be done before(ex ante) or after adoption of the technology (ex post) Contrast effects of intervention against an alternative

Impact assessment is a scientific process that significantly incorporates art in its implementation
The practitioner has to in many cases subjectively address many problems with data, assumptions, models and uncertainties

A paper by Gruere and Pal suggests

Well conducted socio-economic assessments can
Objectively weigh benefits and cost for better decisions Provide useful lessons that may avoid costly mistakes Suggest management practices to increase benefits from use Support economically beneficial applications and pave the way for promising new tech

What drives SEC inclusion?

Knowledge creation Understanding role of technology Regional considerations National laws and regulations International agreements Other political, institutional and stakeholder interests

Socio economic considerations and Article 26.1 of the Cartagena Protocol on Biosafety
Applies to decision on import only National measures Voluntary NOT mandatory
1 . The Parties, in reaching a decision on import under this Protocol or under its domestic measures implementing the Protocol,

may take into account,

Especially WTO

consistent with their international obligations,

Strictly a specific focus and target group Explicit impact indicator

socio-economic considerations arising from the impact of living modified organisms on the conservation and sustainable use of biological diversity,

especially with regard to the value of biological diversity to indigenous and local communities

Objective driving socio-economic consideration assessments

Technology assessments
Technology assessment within biosafety regulatory processes that lead to an approval or rejection

For biosafety regulatory processes one needs to understand:

the impact of the inclusion of socio-economic issues in decision making The relationship / interaction with the risk assessment process

Consider impacts on innovation, opportunities lost due to additional regulatory hurdles and who is impacted more by regulatory actions and technology decisions

Biosafety regulatory design implies establishing a balance between

Democratic societies right to know vs. Freedom to operate vs. Freedom to choose

Important distinction
An impact assessment during the biosafety regulatory stage needs to be ex ante For monitoring or standard technology evaluation purposes this is a conventional expost assessment

What are the goal and objectives for socioeconomic assessments as related to biosafety or technology decision making?

Specific questions about potential socioeconomic consideration inclusion

Feasibility Can all socio-economic considerations be assessed ex ante and/or ex post? How are assessment outputs going to be used in a decision making process? Does inclusion of socioeconomic considerations improve societys welfare? Are we considering all benefits, costs, risks and potential outcome from the inclusion of socio-economic considerations

Fit with decision making process Utility

Regulatory impacts

II. Socio-economic assessments: What do we know?

What do we know from the economic impact assessment literature to date?

A review of 137 peer reviewed studies Examined studies with a focus on:
Farmers, household and community

Industry and markets

Consumers Trade
Citation: Smale, Melinda; Zambrano, Patricia; Grure, Guillaume; Falck-Zepeda, Jos; Matuschke, Ira; Horna, Daniela; Nagarajan, Latha; Yerramareddy, Indira; Jones, Hannah. 2009. Measuring the economic impacts of transgenic crops in developing agriculture during the first decade: Approaches, findings, and future directions. (Food policy review 10) Washington, D.C.: International Food Policy Research Institute (IFPRI) 107 pages

Food Policy Review 10 conclusions

On average profitable but averages mask variability by agro-climate, host cultivar, trait, farmer
Too few traits, too few cases/authors generalizations should not be drawn yet...need more time to describe adoption

Food Policy Review 10 conclusions

Next decade
Cross cutting issues for further study including impacts of poverty, gender, public health, generational Need improved methods to examine broader issues

Relationship between gender differentiated adoption and impact

Access and control
Time Assets Inputs Credit Market Prices Technology cost Information sources and flows

Knowledge
Crop and trait Economic Health Nutrition Labor Social norms

Attitudes
Perceived and actual risk Social norms Gender roles

Technology developers

Regulators

Farmers

Farming practices

A joint study on the Bt/RR maize in the Philippines done by UP-LB and IFPRI examing relationship between gender and biotechnology adoption and impact

Policy Regulations Governance Institutions

Impacts
By crop- trait Economic Health Nutrition Labor Social norms

Impact on Farmers / Household / Community

Potential issues for a socio-economic assessment
Value of biodiversity to indigenous communities Value of biodiversity to individual farmers, households, and communities

Profits and benefit/cost ratios

Net income Use of productive inputs (pesticides,) Production practices Gender differentiated access and control, knowledge and/or attitudes Health impacts Safety first, downside risk, minimum production for survival Irreversible costs and benefits Freedom of choice and freedom to operate

Lists of potential issues should not be viewed as check lists Prudent to carefully choose which issues are relevant to the technology decision making process

How does a producer benefit? Insect resistance and herbicide tolerant traits
+
Decrease pesticide application cost -Insecticide -Machinery & Equipment

The case of Bt/RR maize

Increase Yield -Timing applications -Reduced damage bolls
Additional cost of controlling secondary pests Amenable to IPM and/or controlled easily

Labor

The management convenience factor

Allow use of alternative production technologies - No-till low-till

Impacts on: Producer Profit Producer Surplus Cost to Benefit Livelihoods

0
Labor
Additional cost of using the Technology

Price change due to increase in supply

Tech fee

Black Sigatoka Resistant Bananas in Uganda: An ex ante study

One year delay forego potential annual (social) benefits of +/- US$200 million A GM banana with tangible benefits to consumers increases their acceptance for 58% of the population
Photos credits: Kikulwe 2009 and Edmeades 2008

Kikulwe, E.M., E. Birol, J. Wesseler, J. Falck-Zepeda. A latent class approach to investigating demand for genetically modified banana in Uganda Agricultural Economics. Publication Forthcoming 2011.

Bt maize in the Philippines: An Ex post study

Growing Bt maize significantly increases profits and yields Significant insecticide use reductions Adopters tend to:
Cultivate larger areas Use hired labor More educated have more positive perceptions of current and future status
Change in economic surplus (mill pesos) Producer Surplus Seed Innovator Total Surplus Producer Share (%)
Bt maize studies in Philippines led by Dr. Jose Yorobe Jr. with 466 farmers in 16 villages Isabela Province, Luzon, South Cotabato Province, Mindanao

7906 703 8609 92 8

Innovator Share (%)

Bt maize in Honduras: Ex post study

Excellent insect control Bt yield advantage 8931136 Kg ha-1 yield (2433%) Bt maize yields preferred even by risk averse producers 100% higher seed cost than conventional hybrid Institutional issues important
Small Resource-Poor Countries Taking Advantage of the New Bioeconomy and Innovation: The Case of Insect Protected/Herbicide Tolerant Maize in Honduras. Jose Falck Zepeda, Arie Sanders, Rogelio Trabanino, Oswaldo Medina and Rolando Batallas-Huacon. Paper presented at the 13th ICABR Conference The Emerging Bio-Economy, Ravello, Italy June 17-20, 2009.

Photos credit: Sanders and Trabanino 2008

III. Biosafety and socioeconomic considerations inclusion: Countries experience

Argentina vs. Brazil

Issue
Type of inclusion Scope / What

Argentina
Mandatory

Brazil
Only if a socio-economic consideration(s) identified during the scientific biosafety assessment Not clear / open

Economic impacts on trade and competitiveness Considering expanding to impacts to producers

Who

Minister of Finance and Trade special unit

Two separate bodies

CTNBio: biosafety assessments National Biosafety Council: decision making

Rationale for dual bodies was to separate technical assessment from the political assessment
NBC commissions a third party to do SEC assessments

When

Commercialization

Commercialization

European Union vs. USA/Canada

Issue Type of inclusion European Union
Mandatory (?)

USA / Canada
Not required. Proponents may submit study with application dossier but regulators are not mandated to consider socio-economic considerations
Legal philosophy used to be to leave consideration of socio-economic considerations to the marketplace (and courts)

Scope / What Who

Not clear still negotiating Proponent (?)

None None proponent may include report on socioeconomics in application dossier

Regulatory agency does not have an obligation to consider SEC assessment

When

Approvals and Post-release monitoring (?)

None

The Netherlands Commission on Genetic Modification (COGEM 2009) proposal: Issues for consideration of SEC
Benefits to society e.g. yield increase or food quality improvement

Economics and prosperity such as increased employment and productivity

Health and welfare for workers, the local population and consumers Local and general food supply these should remain at the same level or improve Cultural heritage if desired, specific elements of cultural heritage or local customs should be preserved Freedom of choice both consumers and producers should be able to choose between GMO and GMO-free products Safety in terms of bother personal and the environment Biodiversity

Environmental quality

IV. Practical considerations and options for biosafety regulatory design

R&D and product development life cycle

1
Product Concept Discovery

2
Early Product Testing & Development

3
Integration & Product Selection

4
Product Ramp Up

5
Market Introduction

Confined Field Trials 1 3 years 1 3 years 1 3 years

Author: Ramaeker-Zahn

Considerations for regulatory design

Issues
Type of inclusion
Scope

Options
No inclusion vs. Mandatory vs. Voluntary
Narrow interpretation article 26.1 Narrow set of socio-economic issues Broader set of assessments (SIA or SL)

Approach Assessment trigger When

Concurrent but separate vs. Sequential vs. Embedded Implementation entity Each submission vs. Event-by-event Laboratory/greenhouse vs. CFTs vs. Commercialization For post release monitoring At all stages? Choice of methods for ex ante assessments is much more limited than for ex post Decision making rules and standards Method integration, standards, tolerance to errors

How?

Potential implications from SEC inclusion into decision making

Potential for introducing uncertainty that can lead to an unworkable system if rules and standards are not clear Gain more and/or better information about technology impacts for decision making Balance gains in information, additional costs & effort, and innovation What to do with SEA results?

What can a decision maker do with the results a socio-economic assessment?

REGULATORY DECISION

Not approve

ASSESSMENT OUTCOME

SEC assessment

Negative Socio Economic Assessment due to institutional issues Biosafety renders product to be safe

Require more information

Biosafety assessment

Approve after resolving institutional issues

Potential implications from SEC inclusion into decision making (cont..)

Cost of compliance will increase Time to completion may increase Reduction in the ability for the country to innovate Consider impacts on public sector and crops and traits of interest to Philippines Difficulties for private and public sector investments

Contrasting benefit levels from GE crop adoption with higher costs and regulatory lags in the Philippines
Bt eggplant
Net Benefits baseline (NPV US$) 20,466,196

MVR tomato
16,748,347

Bt rice
220,373,603

PRSV resistant papaya

90,765,793

Impact on net benefits due to an increase in the cost of compliance with biosafety 75% higher 200% higher 400% higher 0% -2% -5% -1% -3% -7% 0% 0% -1% 0% 0% -1%

Impact on net benefit due to an Increase regulatory time lag 1 year longer -28% -36% -12% -27%

2 years longer
3 years longer

-56%
-79%

-71%
-93%

-23%
-34%

-49%
-67%

Notes: 1) Source: Bayer, Norton and Falck Zepeda (2008), 2) Discount rate for the estimation of NPV = 5%, 3) Change in Net benefits defined as the total benefits estimated using the economic surplus minus total regulatory costs.

Key messages
Countries need to clearly articulate:
Why they want to include socio-economics? Does inclusion improve societys welfare? Additional regulatory burden and innovation Clear decision making rules and standards

Key messages
Careful evaluation of benefits, costs, risks and outcomes from inclusion of SEC assessments
No approvals carry risk. there is also risk in the status quo

Countries have many options and choices Worst possible outcome is a process with a mandate but with no implementation guidance

Key messages
In the end, SEC inclusion needs to contribute to a functional biosafety assessment and decision making process
Predictable Transparency Assessment hurdle proportional to risk Cost and time efficient Explicit rules and decision making standards Maximize the benefits